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Flashcards in Franchise Deck (6)
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1
Q

What is a franchise?

A

A franchise is the right given by one business (the franchisor) to another (the franchisee) to sell goods or services using its name.

2
Q

What are the advantages of being a franchisee?

A

More customers due to using a successful brand name and products.

Support, training and advice from the franchisor.

3
Q

What are the disadvantages of being a franchisee?

A

Additional costs – initial fee and regular royalties (based on revenue)

Less freedom in how you run the business

Your business can suffer if the brand name becomes less popular

4
Q

What are the advantages of being a franchisor?

A

Risk-free income from initial fees and royalties

Can expand without paying to set up new branches

No liability at all if a franchisee’s business fails

5
Q

What are the disadvantages of being a franchisor?

A

Only earns the royalties instead of all of the profits from new branches

The whole business could lose popularity if one branch gives it a bad name

6
Q

What are royal payments?

A

These are regular payments by the franchisee to the franchisor.
They may be a percentage of the franchisee’s sales revenue, or they may be a flat fee.